Billions in benefits owed but unclaimed

Banks, retirement fund firms, insurance companies and the JSE are sitting on more than R90bn in unclaimed benefits belonging to members of the public, including R4.5bn in unclaimed dividends. They are trying to trace millions of beneficiaries who might not know they are due a payout.

According to the Financial Sector Conduct Authority (FSCA), the value of unclaimed assets held by financial institutions was R88.56bn in 2022, with retirement benefits making up 53%, followed by 38% held by investment and life insurance schemes. That figure is now estimated at more than R90bn.

The FSCA said the reasons for failure to claim benefits included inaccurate member information, where members do not provide funds with updated contact details, or where employers do not provide comprehensive details of members and their beneficiaries.

It said many employers failed to provide members with sufficient information about their entitlement to withdraw benefits. There were also not enough mechanisms to enable workers from other countries who left South Africa soon after their work permits expired to claim benefits from their home countries and get paid in those countries.

The FSCA also blamed poor administration and record-keeping by funds and their administrators.

The JSE kicked off a campaign in February to encourage shareholders to claim about R4.5bn in unpaid dividends. Vuyo Lee, the JSE's director for marketing and corporate affairs, said that since “Claim It” was launched, almost 65,000 people had approached them to check on their unpaid dividend status, and 8,100 people were matched as beneficiaries of dividends in the participating stocks.

Johnathan Lamb, executive head of channels and partnerships at Standard Bank Corporate and Investment Banking, said the institution had partnered with Robin Hood, a fintech start-up that was helping it trace beneficiaries of unclaimed funds.

“The current system is fragmented, manual, expensive and ineffective. Most people are not even aware they are owned anything; and when they are contacted the process can often feel more like fraud than a service, resulting in low benefit 'claim' rates,” he said.

Through the fintech, the assumption is that if an individual ever owned a policy or was a pension fund member, they probably also opened a bank account.

In the first phase of the campaign, about 13,000 retail customers were successfully matched and were being paid, Lamb said. “The results exceeded expectations, both in terms of match rates and user engagement. People responded quickly, and got paid.”

He said many of the payments were about R3,000. “Not life-changing money, but enough to buy groceries, cover school fees or buy data needed to look for a job.”

Hanneke Pepler said in terms of the ASISA Guideline on Unclaimed Assets, a customer’s right to an unclaimed asset remains until the claim is paid or the asset returned, regardless of the timeframe.

"This means that ASISA members are committed to honouring valid claims on unclaimed policy benefits and investment proceeds no matter how long it takes to trace the beneficial owner of the asset, such as policyholders, beneficiaries, investors or heirs," she said.

The right of a customer to unclaimed funds is held in perpetuity, therefore a claim by our customer will be honoured once validated, despite any time frames.
— Absa

Emashni Robert, head of customer communications for Old Mutual, estimated that R10bn in funds linked to retail financial products, including retirement fund products, remained unclaimed at the life assurer, affecting 302,000 customers. Of this, she said, R8.4bn was tied to non-retirement retail products, affecting 230,497 people.

Robert said Old Mutual uses SMSes, e-mail and telephone calls to alert people that they may have unclaimed funds. “We will also use accredited third-party tracing agents to find customers or their beneficiaries,” she said.

Caroline Naylor-Renn, COO at 10X Investments, said they have about 2,000 members with unclaimed benefits amounting to R45m. Most of the unclaimed benefits resulted from members leaving their employers and not giving the fund their new contact details.

“Broadly, issues relate to outdated or missing personal records, poor data retention, inconsistent approaches to identifying and managing unclaimed assets, and incomplete member data from employers. Shifts in intermediaries and administrators over time also lead to assets going dormant.”

Naylor-Renn said the industry could do more. “It needs to be solved at the beginning of the process and it needs to be mandatory for the employer to pass on new contact details of departing employees so the pension fund can stay in touch with them.”

She said unclaimed benefits remain invested and can continue to grow until claimed. “Fees continue to be taken, so sometimes a small credit can become depleted, but that is the only [bad] thing that can happen.”

Speaking at the launch of FNB's latest retirement insights survey on Thursday, Lytania Johnson, CEO of the personal segment division, said the issue of unclaimed benefits was an ongoing conversation in the industry and financial institutions were working to trace beneficiaries.

“We are trying to track and trace them. That is a process, but contractibility is sometimes a challenge. The code of banking practice tells you how long you keep it in the account and how long the customer has the right to come back and claim it,” Johnson said.

“We basically track it and keep it, and at some point we just have to always remember the customer has the right to claim it.”

Absa said it proactively identifies and contacts owners of unclaimed assets. It said it follows established and regulated processes to ensure the assets go to the rightful owners across the various asset types, including deposits, transactions, securities, investments, insurance and others.

“Unclaimed assets due to Absa customers amount to less than 1% of the total unclaimed assets in South Africa. The right of a customer to unclaimed funds is held in perpetuity, therefore a claim by our customer will be honoured once validated, despite any time frames.”

Radebe Siphamla, co-portfolio manager at Mergence Investment Managers,said tracing beneficiaries of unclaimed funds has been slow due to a lack of knowledge, coupled with the historical migrant labour system, where people would work in the cities and retire in the apartheid-era homelands without collecting all that was due to them.

“It’s worth remembering the historical context of the country whereby most information on contact details or physical addresses of beneficiaries and of the actual owners of the funds would not be updated to incorporate people changing addresses, and the fact that for a long time most rural areas and townships didn’t have proper numbering systems so locating people was difficult,” he said.